Fonterra gets further hit as it recalls milk powder

BEIJING -- Fonterra, whose reputation has already been damaged by the botulism scare, recalled batches of milk powder in Sri Lanka Sunday as the country's tests show the powder is tainted with a farm chemical, another blow for the dairy giant.

The move came after Sri Lanka's Court of Appeal issued an order on Friday to prevent Fonterra Brands Lanka (Pvt) Ltd., which is locked in a battle with local health officials over allegations of contaminated milk powder, from publishing any advertisements in the "manner and style deceiving the consumers and public that the products imported by them are 100 percent perfect."

Fonterra, the world's largest dairy exporter, has been accused of having dicyandiamide (DCD) in its milk power, a chemical used in fertilizers to prevent them from soaking into rivers, which can be toxic in large amounts.

The New Zealand dairy giant announced on Aug 2 that tests of some ingredients used in infant formula and sports drinks have turned up a type of bacteria that could cause botulism, a rare but sometimes fatal paralytic illness caused by a nerve toxin.

This is the second contamination issue involving Fonterra this year. In January, dicyandiamde, a potentially toxic chemical, was found in some of its products.

Fonterra's chief executive, Theo Spierings apologized last Monday for the contamination scare at a media briefing in Beijing.

Wang Dingmian, former director of the Dairy Association of China, said there is no need for public panic as no illnesses have been reported yet, "but the scandal may urge Chinese consumers to rethink their unsuspecting favor for foreign-branded baby formulas."

Foreign-branded infant formula has become a premium commodity in China since Chinese dairy company Sanlu was found to have added kidney-damaging melamine to bulk up formulas. It caused six deaths and hundreds of illnesses in 2008.

China has already suspended imports from Fonterra after the botulism incident, a blow for the New Zealand dairy giant. In the first half of this year, China imported 371,000 tons of milk powder from New Zealand,accounting for 83.3 percent of the country's total milk powder imports, according to Chinese customs data.